Greece passes bailout legislation but IMF warns of sustainability
17 August, 2015
Greece on Friday passed legislation on spending cuts and tax rises demanded by its creditors, paving the way for its 3-year, €86bn bailout package.
Last week we saw the Euro gain strength through the week as the vote drew nearer, and although Greek PM Alexis Tsipras needed the support of opposition parties to win the vote, parliament agreed to the measures on Friday after another round of all-night talks. Head of the IMF, Christine Lagarde, however again warned that debt relief will be necessary to make Greece’s economy sustainable again, so while the immediate effect on the Euro has been to increase its value now that the crisis has technically been averted, there could be plenty more from this story in the coming months. “Greece cannot restore debt sustainability solely through actions on its own”, warned Ms Lagarde, although Eurogroup head Jereon Djisselblom said the deal would “address the main challenges facing the Greek economy”, which if correct could mean a general increase in the value of the single currency.
The German parliament also needs to pass a vote on the bailout this Wednesday.
Inflation this week
Looking to the week ahead we have inflation figures due out in the UK (Tuesday), USA (Wednesday) and Canada (Friday). The UK figures will be of interest to anyone sending money abroad as we have seen weaker unemployment figures at home in the last 2 months and if inflation falls from its current 0.8% level the Bank of England would again be less likely to hike interest rates in the coming months, which would hurt the value of the Pound. Eurozone inflation figures for July were released on Friday, and along with GDP were slightly lower than forecast, sending the Euro cheaper in Friday afternoon trading. The US Dollar also reached its cheapest level against the Pound for 6 weeks, and the Pound also currently buys more South African Rand than it has for over 10 years so overall now is a good time to be considering fixing your exchange rate against many of the major currencies.
Today’s only other important data are Swiss retail sales which were worse than expected at 7.15am, and Eurozone trade balance, due at 10am.
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